2018 July - June 2019 Audit Report Definitions

Audit Report - Alpha Strategy

Audit Report  - High Growth

Audit Report - Multi-Strategy

Audit Report - Swing Strategy

 

Acronym

Metric

Definition

Description

Balance / Account Balance

Account Balance

Account Balance at a particular date is the value of the investors account including profit or loss on closed / realised trades, but does not include unrealised profit or loss on active / open positions.

 

Start of month

 

The Account balance at the start of the month.

 

Net deposits / withdrawals

 

The net total of deposits and withdrawals made in the period by the investor.

 

Gross $

Closed trade P&L

The cumulative amount of realised profits and losses on all individual realised / closed trades in the period in AUD, after deducting brokerage and slippage.

 

End of month

 

The Account balance at the end of the month

 

Gross %

 

The Gross $ in the period as a percentage of the Start of month

 

Management Fee

Management Fee

Account Balance times the Monthly MMFR%

 

MMFR%

Monthly Management Fee Rate%

The amount charged as a management fee each month for each strategy.

Multi Strategy, Swing Strategy MMFR = 0.183%

High Growth Strategy, Alpha Growth Strategy MMFR = 0.275%

Cumulative Gross $

 

The $ amount of the cumulative monthly Gross $ since inception of the investment strategy.

 

HWM

High Water Mark

The highest Cumulative Gross $ achieved at the end of a month since the inception of the investment strategy.

If the Cumulative Gross $ higher than the existing High Water Mark, it will become the new High Water Mark.

Gain Over HWM

Gain Over previous HWM

If the Cumulative Gross $ at the at the end of the month is higher than the previous HWM, then this becomes the new HWM, and the amount of the difference between the two is the Gain over the previous HWM

 

Performance fee rate

 

The monthly performance fee charged on a strategy expressed as a percentage.

Multi Strategy, Swing Strategy MMFR = 2.2%

High Growth Strategy, Alpha Growth Strategy MMFR = 3.3%

Performance Fee

 

The amount charged each month as a performance fee.

 

The performance fee is calculated as the performance fee rate times the Gain Over HWM.

Performance fee example: The existing HWM is $10,000.  The ending Cumulative Gross $ for the month is $15,000. The new HWM becomes $15,000 and the performance fee is charged on the difference ($15,000 - 10,000 = $5,000), times the Performance fee rate.

Total fees

Total Fees

The total fees charged in the month.

The sum of the Management fee and the Performance fee charged in the month.

Net $

Closed trade P&L less Total fees

The amount of the net return to an investor in $ after all fees, brokerage, and slippage in the month have been deducted.

 

Net %

Net Return

The amount of the net return to an investor in % after all fees, brokerage, and slippage in the month have been deducted.

 

Cumulative net return %

Cumulative net return %

The sum of the monthly Net Return’s (Net %) , for the period 1 July 2018 until 30 June 2019 or from the date of inception of the strategy until 30 June 2019 if this is later.

 

Sum

 

The sum of the months Net % for the months in the calendar year in the particular row in the table.

 

The Sum is not an annualised return of any sort.

For example, if the strategy first started recording Net % in October 2019, and the Net % for October 2019 was 4.032%, for November 2019 was 18.928%, and for December 2019 was -6.788%, then the Sum for the 2018 row would be 16.172%.

Source Data

 

The trades undertaken in the High Growth, Alpha Growth, Swing and Multi Strategy Model Portfolio Traders Account for the period from 1 July 201 until 30 June 2019 on which the Statement of Net Returns have been calculated.

High GrowthAlpha GrowthSwing and Multi Strategy 

MaxDD

Maximum Drawdown

MDD = (TV– PV) ÷ PV

where;

TV = Trough Value

PV = Peak Value

A maximum drawdown (MDD or MaxDD) is the maximum loss from a peak to a trough of a portfolio, before a new peak is attained. Maximum Drawdown (MDD) is an indicator of downside risk over a specified time period. It can be used both as a stand-alone measure or as an input into other metrics such as "Return over Maximum Drawdown" and the Calmar Ratio.

Slippage

Slippage

Slippage occurs when there is a change in the bid/ask spread. A market order may get executed at a less or more favourable price than originally intended when this happens. With negative slippage, the ask has increased in a long trade or the bid has decreased in a short trade.

Slippage occurs when there is a change in the bid/ask spread. A market order may get executed at a less or more favourable price than originally intended when this happens. With negative slippage, the ask has increased in a long trade or the bid has decreased in a short trade.

Equity

Account Equity

Account Equity in trading refers to the  amount of money that an investor would have in their account / investment strategy when all  open or active positions are realised and closed.

 

Calmar (MAR) Ratio

Calmar (MAR) Ratio

Calmar Ratio = CAGR / MaxDD

Developed by Terry W. Young in 1991, the Calmar ratio is short for California Managed Account Reports. The Calmar ratio is a comparison of the average annual compounded rate of return and the maximum drawdown risk of commodity trading advisors and hedge funds. The lower the Calmar ratio, the worse the investment performed on a risk-adjusted basis over the specified time period; the higher the Calmar ratio, the better it performed. Generally speaking, the time period used is three years, but this can be higher or lower based on the investment in question.

Sharpe Ratio

Sharpe Ratio

Sharpe Ratio = (Mean Portfolio Return − Risk-Free Rate)/Standard Deviation of Portfolio Return

The Sharpe ratio is the average return earned in excess of the risk-free rate per unit of volatility or total risk. Subtracting the risk-free rate from the mean return, the performance associated with risk-taking activities can be isolated. One intuition of this calculation is that a portfolio engaging in “zero risk” investment, such as the purchase of U.S. Treasury bills (for which the expected return is the risk-free rate), has a Sharpe ratio of exactly zero. Generally, the greater the value of the Sharpe ratio, the more attractive the risk-adjusted return.

Sortino Ratio

Sortino Ratio

The ratio S is calculated as;

S = (R-T)/DR,

where;

R is the asset or portfolio average realised return,

T is the target or required rate of return for the investment strategy under consideration (originally called the minimum acceptable return MAR),

DR is the target semi-deviation (the square root of target semi-variance), termed downside deviation.

The Sortino ratio improves upon the Sharpe ratio by isolating downside volatility from total volatility by dividing excess return by the downside deviation. The Sortino ratio is a variation of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the asset's standard deviation of negative asset returns, called downside deviation. The Sortino ratio takes the asset's return and subtracts the risk-free rate, and then divides that amount by the asset's downside deviation. S is expressed in percentages and therefore allows for rankings in the same way as standard deviation.

PF

Profit Factor

PF = GP / GL

where;

GP = Gross Profits

GL = Gross Losses

This performance metric relates the amount of profit per unit of risk, with values greater than one indicating a profitable system.